What is a Mortgage Origination Fee?

Forget about location, location, location. What about the fees, fees, fees?! When you buy a Southern California home, you receive a Closing Disclosure form. This document lists all of the details of your purchase, including the type of loan you used, the terms of your loan (length as well as interest rate), any discount points paid, your down payment, closing costs due, and all of the fees associated with your loan. This includes a mortgage origination fee. You might be thinking to yourself, “what is that?!” Well, let me explain it to you.

What is a Mortgage Origination Fee?

Mortgage Origination Fee 101

Basically, a lender charges this fee to process your mortgage loan. Most lenders charge this fee. However, not all of them do. This is one of the reasons it behooves the buyer to shop around for lenders before they settle on which one to use. The lenders that do charge this fee may impose this either as an upfront fee or include this with other expenses that incur interest. Those end up costing you more over the life of the loan. So, you need to be aware of how exactly the lender chooses to charge you.

How Much Do You Pay for This Fee?

Like most fees, these vary from lender to lender. However, buyers should expect to pay between 0.5 and 1% of the total amount borrowed. For example, if you pay $750,000 for a home and put 10% down, you might expect to pay between $3,375 and $6750 for your mortgage origination fee. But this fee is negotiable. So, don’t hesitate to ask about lowering your fee…or eliminating it altogether.

Review Your Loan Estimate

By law, a lender must provide a borrower with a loan estimate within three days of receiving a borrower’s loan application. Make sure you look it over thoroughly. Pay special attention to Section A to find out what your origination fee will be. Other fees you may find include underwriting, admin, appraisal review, and processing (among others). If you have any questions about these fees, talk to your lender. You may be able to reduce some of them simply by asking. That could save you a nice chunk of change. So, it’s definitely worth a try.

Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty